Dow Dips but Finishes Week Higher

NEW YORK ( TheStreet) -- Stocks finished lower Friday following a weaker-than-expected December jobs report and an adverse court ruling related to foreclosure liabilities that sank bank stocks.

The Dow Jones Industrial Average shed 23 points, or 0.2%, to close at 11,674. Earlier in the session, the bellwether index dipped as low as 11,599. The S&P 500 finished lower by 2 points, or 0.2%, at 1,271, and Nasdaq Composite slumped 6 points, or 0.2%, to settle at 2,703.

Still, the Dow managed to advance for the sixth consecutive week, starting the year with an 0.8% gain. The S&P 500 rose 1.1%, while the Nasdaq surged 1.9%. For the Dow, the rise was its biggest weekly advance since the week ended Dec. 3. It was also a good sign for the rest of 2011 as the Dow has finished in positive territory 74% of the time when it posts a gain for the first five trading days of the year.

Breadth was negative among blue chips Friday with 12 of the Dow's 30 components moving higher. Boeing ( BA), Merck ( MRK) and Pfizer ( PFE) were the biggest percentage gainers within the Dow.

Financials were dragging markets lower, with JPMorgan Chase ( JPM), Bank of America ( BAC) and Travelers ( TRV) among the worst performers on the Dow.

LPL Financial's Jeff Kleintop said a turn lower for equities was likely overdue. "The market is so overbought, up over both its 50-day and 200-day moving average. That can be sustained as long as momentum is strong. Momentum has stalled in the last few weeks, which means a pullback could be in store," he said.

The weakness in the banks was driven by news that Massachusetts' highest court had upheld a ruling that foreclosures enacted by two banks US Bancorp ( USB) and Wells Fargo ( WFC) were invalid because the banks failed to prove that they held the mortgage at the time of the foreclosure.

Wall Street is worried the decision may have a cascading effect on other court rulings on disputed foreclosures. Shares of U.S. Bancorp were down 0.8% to $26.09, while the stock of Wells Fargo shed 2% at $31.50.

The December jobs report was the most closely watched news for traders however and the data was mixed. The Labor Department said the U.S. economy added 103,000 jobs in December , falling short of the 150,000 additions that economists had been expecting, according to The unemployment rate, however, fell to a better-than-expected rate of 9.4%, from 9.8%, previously, outpacing estimates for a December rate of 9.7%.

>>Unemployment Metric Lacking-Economists

"Overall the report fell short of expectations but when looked at from a two-to-three month perspective as opposed to a one-month report, it is generally positive," said Patrick O'Keefe of J.H. Cohn and a former deputy assistant secretary at Department of Labor. "The month to month was less robust but not severely so. It does confirm that the labor market is improving but at a sub-par rate."

Separately, Federal Reserve Chairman Ben Bernanke said in testimony before the Budget Committee that economic recovery will likely pick up in 2011 but there will be slow progress in the jobs market.

"The projections submitted by Federal Open Market Committee (FOMC) participants in November showed that, notwithstanding forecasts of increased growth in 2011 and 2012, most participants expected the unemployment rate to be close to 8 percent two years from now," said Bernanke. "At this rate of improvement, it could take four to five more years for the job market to normalize fully."

Late Friday, the Federal Reserve said consumer credit expanded $1.3 billion in November, driven by student loans. Economists had expected the number to contract by $2.5 billion after expanding by $3.4 billion in October.

Also President Obama announced new members in his economic team on Friday, appointing Gene Sperling, currently senior adviser to Timothy Geithner, as director of the National Economic Council.

Shares of AK Steel Holding ( AKS) plunged 7.4% at $15.36 on a downgrade to sell from neutral at Goldman on weakness in the electrical steel market .

Baker Hughes ( BHI) and Diamond Offshore ( DO) saw shares surge 3.2% and 4.8% respectively on upgrades from Goldman Sachs , citing expectations for improved margins.

Shares of American International Group ( AIG) were up 1.2% to $61.18 on news that the company agreed to pay $450 million to resolve legal disputes with competitors, according to a Wall Street Journal report. On Friday, AIG's board declared a dividend of about 75 million warrants to buy shares of AIG common stock at $45 a share.

Borders Group ( BGP) is working to refinance its debt . According to a Wall Street Journal report, the company is in talks with restructuring advisors including Jefferies & Co., and is also discussing the possibility of a new debt agreement with one of its lenders, GE Capital. The stock rose 6.8% to 92 cents.

Liz Claiborne ( LIZ) saw its stock slump 13% to $6. Late Thursday, the company lowered its profit outlook on weak December sales for some of its key brands .

Shares of Nine West shoes maker Jones Apparel ( JNY) shed 7% to $14.46 after Morgan Stanley cut its rating on the stock to underweight.

Goodyear Tire ( GT) surged 5.1% to $12.90 after Citigroup upgraded it to a buy.

Shares of Murphy Oil ( MUR) were down 4% to $71.05 after it disclosed that three exploration oil wells in Congo had failed and that it would take a $36 million charge in the fourth quarter.

Shares of Dean Foods ( DF) jumped 11.2% to $9.89 on news that hedge fund titan David Tepper had picked up a 7.3% stake in the company.

In commodity markets, the February crude oil contract fell 35 cents to settle at $88.03 a barrel. The February gold contract rose by $2.8 to trade at $1,368.7 an ounce.

The dollar strengthened against a basket of currencies, with the dollar index upward 0.2%. The benchmark 10-year Treasury note rose 20/32, diluting the yield to 3.3%.


Hong Kong's Hang Seng shed 0.4% and Japan's Nikkei added 0.1%. London's FTSE was lost 0.6% while the DAX in Frankfurt inched 0.6% lower.

--Written by Melinda Peer and Shanthi Bharatwaj in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.